Employment rate at record high in 2017

7 June 2018

Ülle Vannas

In 2017, the unemployment rate was 5.8%, the employment rate 67.5% and the labour force participation rate 71.6%. The labour force participation rate increased by 1.2 percentage points and the employment rate by 1.9 percentage points. The unemployment rate decreased by 1 percentage point. Employment and labour force participation remained high throughout 2017, reaching the highest levels in 20 years. The number of inactive persons continued to decline.

Important indicators in assessing the situation in the labour market are the unemployment rate, employment rate and labour force participation rate. These indicators improved throughout the most of 2017, and, in quarterly comparison, were mostly more positive than the respective indicators for the previous year. Unemployment rate in Estonia has shown a downward trend since 2010, when as much as 16.7% of the labour force was unemployed and was actively seeking work. In 2016, the unemployment rate stood at 6.8%, and in 2017, at 5.8%. The indicator for Estonia in 2017 was 1.8 percentage points lower than the European Union average (EU-28). The lowest unemployment rate was registered in the Czech Republic (2.9%) and the highest in Greece (21.5%; difference with Estonia 15.7 percentage points).

The estimated number of unemployed persons was 40,300, of which almost every third had been seeking work for more than 12 months. In a year, the number of unemployed persons decreased by 6,400, including the number of long-term unemployed, which decreased by 1,300. A person who has been unemployed for a long time is at greater risk of poverty. The long-term unemployment rate for men exceeded that for women (respectively 2.2% and 1.6% of the labour force). In addition to the decrease in the number of persons seeking work, there were also fewer of those in 2017 who had lost hope of finding a job. In 2017, the unemployment rate for Estonians was 4.4% and for non-Estonians 8.8%.

In each quarter of 2017, there were more than 10,500 job vacancies – the last time there were that many job vacancies was during the economic boom. The vacancies, however, tend to be located inconveniently for the job seeker, and the lack of required skills is also an obstacle to getting a job. The unemployment rate for working-age persons with low education level (with basic education or below) was 10.9%, while the unemployment rate among persons with third-level education was only 3.2%. It is important for the prosperity of the labour market that persons attain at least secondary education. In 2017, the share of young people aged 18–24 with low education level and not continuing their studies was 10.8%, and therefore, the target of the Europe 2020 strategy to reduce the share of such young people to 9.5% was not yet reached.

The employment rate (the share of the employed in the working-age population) increased in a year by 1.9 percentage points and was 67.5% in 2017, which is the highest level in 20 years. The number of persons employed increased by 14,000 and is estimated to have reached 658,600. The number of persons employed has increased due to a fall in unemployment as well as an increase in the number of previously inactive persons entering the labour market. Differences in employment by sex, ethnic nationality and place of residence still exist. In 2017, compared to 2016, the employment rate for both men and women increased, but the rate for men was 8 percentage points higher (respectively 71.6% and 63.6%). While ethnic nationality had little impact on the employment rate for men, the employment rate for non-Estonian women was more than 10 percentage points lower than that for Estonian women. Compared to 2010, when the labour market was going through a crisis, the employment rate for non-Estonian women aged 50–74 has improved the least – in 2017, it was only 46.8% (0.8 percentage point increase). In 2017, by county, the employment rate for working-age population was the highest in Harju county (74.2%) and the lowest in Ida-Viru county (53.9%).

In the European Union, as regards employment, the performance of persons aged 20–64 is monitored first and foremost. In 2017, the labour force participation rate in Estonia for persons aged 20–64 was 78.7%. In 2015, a target of the Europe 2020 strategy, according to which the aim of Estonia was 76%, was reached. In this age group, labour force participation has been constantly increasing since 2010, when the indicator was 12 percentage points lower. In 2017, in European comparison, the only countries with higher rates for this age group were Sweden (81.8%) and Germany (79.2%). The average labour force participation rate in EU-28 was 72.2%; labour force participation rate was the lowest in Greece – 57.8%.

The share of employees working full-time in their main job in all employed persons has remained within 89‒90% in recent years (89.2% in 2017). The number of persons working full-time increased by 14,800 in a year. The number of part-time employees decreased by 800. There were 3,800 fewer persons who were not satisfied with part-time work and would have liked to work more than they did (underemployed). The share of the underemployed was the lowest in ten years (0.7% of all employed persons).

The labour force participation rate indicates the share of the working-age population active in the labour market, i.e. how many are employed and how many are unemployed but are currently seeking work. This indicator is also showing an upward trend in Estonia due to an increase in employment. In 2017, the labour force participation rate was 71.6%, which, similarly to the employment rate, was the highest in 20 years. In a year, the indicator increased by 1.2 percentage points. The annual average number of persons active in the labour market increased by 7,000 and is estimated to have reached 699,000. In 2017, among EU-28 countries, the working-age population was more active only in Sweden (72.7%); the average for EU-28 was 64.7%, and the indicator was the lowest in Italy (57.1%).

In addition to the employed and unemployed, there are always persons who do not want to or cannot work. In the context of the labour market, they are considered inactive. The annual average number of inactive persons stood at 277,000, which is 13,500 fewer than in 2016. According to the international methodology, the labour force surveys conducted in Europe do not include those on parental leave, even if their official employment relationship has not ended. The number of persons on pregnancy, maternity or parental leave was 25,600. The number of inactive persons decreased the most due to those who were inactive due to ongoing studies (down by 5,600), pregnancy, maternity or parental leave (down by 2,900) or those who considered retirement age to be the main reason for their inactivity (down by 2,700). There were on average 1,000 fewer persons inactive due to illness or injury than in 2016.

In conclusion, the Estonian labour market was in good shape according to the main indicators, both in comparison with previous years and the rest of Europe. The labour force data of 2017 do not indicate a new crisis just yet.

In the article, data of the Estonian Labour Force Survey, available in the statistical database, have been used. For the comparison of countries, Eurostat data – also available to everyone – from labour force surveys conducted on the basis of a harmonised methodology in the EU countries have been used. In the context of these surveys, working-age population are persons aged 15–74.